Barnett Inc. purchased computer equipment on March 1, 2020, for $31,000. The computer equipment has a useful life of five years and a residual value of $1,000. Barnett uses a double-declining-balance method of depreciation for this type of capital asset. For tax purposes, the computer is assigned to Class 10 with a 30% rate.

Instructions

a. Prepare a schedule of depreciation covering 2020, 2021, and 2022 for financial reporting purposes for the new computer equipment purchased. The company follows a policy of taking a full year’s depreciation in the year of purchase and none in the year of disposal. Round all amounts to the nearest dollar.

b. Taxation Prepare a schedule of CCA and undepreciated capital cost (UCC) for this asset covering 2020, 2021, and 2022, assuming it is the only Class 10 asset owned by Barnett. Round all amounts to the nearest dollar.

c. How much depreciation is deducted over the three-year period on the financial statements? In determining taxable income? What is the carrying amount of the computer equipment on the December 31, 2022 SFP? What is the tax value of the computer equipment at December 31, 2022?

d. How would the calculation of CCA, in part (b), change for 2020–2022 based on the new CCA rules implemented in late 2018 (see footnote 20) assuming this is “eligible property”?